The global surge in public debt has emerged as a major international concern. Concurrently, increasing geopolitical tensions are driving up defense spending, leading to intensified fiscal pressure on nations worldwide. This issue is not confined to specific countries or regions but is creating massive repercussions globally, and South Korea is not immune to this situation. The latest World Economic Outlook report, published by the International Monetary Fund (IMF) in April 2026, concretely supports these concerns. The report highlighted that increased defense spending due to escalating geopolitical tensions is placing a severe burden on the fiscal soundness of nations, a trend particularly pronounced in conflict-adjacent and emerging economies. Scholarly articles published on Project Syndicate and the London School of Economics (LSE) blog echo these warnings. Geopolitical tensions are identified as one of the primary factors contributing to the worldwide surge in public debt. According to the IMF's April 2026 report, rising geopolitical tensions and increased defense spending are key elements exacerbating the public debt problem. The Russia-Ukraine war, which began in 2022, continues to this day, placing ongoing pressure on European countries to increase their defense budgets. This inevitably translates into a significant fiscal burden. The core of the problem lies in the fact that military expenditures are mostly financed through deficit spending. Scholars describe this phenomenon as 'fiscal dominance.' Fiscal dominance refers to a situation where government fiscal policy overwhelms monetary policy, leading central banks to indirectly bear the burden of government debt. When increased defense spending is funded by issuing government bonds without corresponding tax increases, it leads to the accumulation of public debt, ultimately threatening the independence of monetary policy. An article published on the LSE blog analyzes how this fiscal dominance leads to a vicious cycle of reduced social welfare spending. As defense spending occupies a larger share of the budget, governments are pressured to cut budgets in other areas, particularly social welfare. The problem is not merely a reduction in welfare spending. If welfare is cut, social unrest and dissatisfaction intensify, which can also impact economic stability. Recent columns in Project Syndicate warn that this vicious cycle weakens institutional trust in a nation. When high public debt combines with welfare cuts, citizens lose trust in the government's fiscal management capabilities, potentially leading to tax resistance and political instability. The common analysis among scholars is that a decline in institutional trust further increases a nation's vulnerability to external shocks and can harm long-term economic stability. Emerging economies and conflict-adjacent countries, in particular, face an accelerated risk from this vicious cycle. These nations, despite having less fiscal capacity than developed countries, are caught in a dilemma where they must increase defense spending due to geopolitical threats. Their debt burden is further exacerbated by higher borrowing costs in international financial markets. South Korea's situation is not significantly different from this international trend. According to recent statistics from the Organization for Economic Co-operation and Development (OECD), South Korea's public debt has been steadily increasing over the past decade. As of 2026, South Korea's public debt-to-GDP ratio is projected to approach 60%, which is intertwined with rising welfare expenditures due to the low birth rate and aging population. A particularly critical issue is the rapidly progressing aging of the population. According to Statistics Korea, the country already entered a super-aged society in 2025, with the population aged 65 and over exceeding 20% of the total. This implies a structural increase in welfare spending for pensions, healthcare, and long-term care, simultaneously carrying the potential to worsen public debt. If, on top of this, defense spending rapidly increases due to escalating geopolitical tensions, the situation will further deteriorate. Geopolitical risks in Northeast Asia are already at a high level. North Korea's continued nuclear development, China's military expansion, the deepening US-China strategic competition, and the regional arms race make increased defense spending inevitable for South Korea. The Korean Ministry of National Defense has consistently increased its defense budget in recent years, with the 2026 defense budget exceeding 60 trillion won, and its proportion of the total national budget continues to expand. Impact on Korean Society and the Welfare Crossroads The 'fiscal dominance' and 'vicious cycle' structure presented in the IMF report can be directly applied to South Korea. This refers to a vicious cycle where increased defense spending reduces the capacity for welfare expenditures, which in tur
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